So let’s dispel some of the most common misinformation about car insurance.

8 myths you’ve probably heard about car insurance

Close up of man's hands holding pen and insurance forms

When it comes time to buy a new auto insurance policy, it’s important to understand what does — and doesn’t — influence how much you’ll pay.

Here are eight of the most common misleading myths.

1. Insurers base your rate on the color of your car

One of the most persistent myths about car insurance is that red vehicles cost more to insure. That’s just not true.

In fact, none of the information you give your insurer — such as your car’s make, model, year and vehicle identification number (VIN) — tells them what color your car is.

Insurers care much more about factors like your driving record, how much you use your car, where you park it and your car model.

2. My credit score doesn’t impact my insurance rate

Man Holding Smartphone Showing Credit Score Rating on Screen
Andrey_Popov / Shutterstock

Nearly all states use a credit-based insurance score to calculate your premiums. So unless you live in California, Massachusetts or Hawaii, your credit score plays a huge role in how much you’ll pay. (Michigan also recently passed a law that bans the use of credit scores in auto insurance, but not credit information or insurance scores.)

Credit-based insurance scores are measured on a different scale than the typical FICO rating, but they tend to be in the same ballpark. So if you have poor credit, your premiums will probably reflect that.

3. Older drivers cost more to insure

It’s actually the opposite. Because drivers over the age of 55 tend to drive less and are generally safe drivers, many insurance companies will offer them discounted rates on auto insurance.

And if you complete an accident prevention course through either a local or state agency or the AAA or AARP, you can also get a reduction on your insurance rates. Finally, once you retire and are presumably using your car less, your insurer may also grant you a discount.

If you’re a safe driver approaching your golden years, talk to your insurer about how they can help you stretch out your retirement income with a lower rate.

4. Someone borrowing your car will be covered by their own insurance

Man giving young woman car keys
Lisa F. Young / Shutterstock

If you lend your car to a friend or family member and they’re in an accident, the question of whose insurance pays for it will be decided by who’s determined to be at fault. When the other driver is at fault, their insurance should just take care of it.

But if the driver of your car caused the accident, things get a little more tricky.

Usually, you won’t be on the hook for the expenses, but if your loved one doesn’t have insurance or enough coverage, your insurer will have to step in. Filing a claim will then go on your own driving record and have an impact on your premium going forward.

5. Accidents and tickets affect my rate forever

You may be relieved to hear that tickets only stay on your driving record for three years and accidents for six years. If you keep a clean record for the rest of that period, you should be back to more affordable premiums in no time.

And if you have accident forgiveness on your policy, your first at-fault accident will be forgiven, meaning it won’t even affect your rate in the short term. This is a perk you can either earn through a clean driving record or pay to add to your policy.

6. All car insurance companies have similar rates

Concerned looking couple sit on couch, looking at tablet and pieces of paper
Antonio Guillem / Shutterstock

If that’s what you think, chances are you’re overpaying.

Experts like the Insurance Information Institute will recommend you review at least three different quotes before selecting an insurance policy. You’ll find there’s actually a whole range of different policies at varying price points.

The best way to save on car insurance is to shop around before you settle on the right policy for your needs and budget.

7. Car insurance covers anything that happens to my car

A standard car insurance policy will cover you if you’re in an accident. But let’s say your car is stolen or vandalized or damaged by falling tree limbs, hail, flood or fire, are you covered?

It depends.

To have insurance for all types of accidents or “acts of God,” you’ll need comprehensive and collision coverage on top of your standard policy. You’ll want to read through your policy to confirm what you’ve got coverage for.

8. My insurance covers me whenever I’m using my car

Not exactly. If you’re self-employed and you use your personal vehicle for business, your auto insurance policy may not cover you if you need to make a claim.

If you ever use your car for work, you’ll need to make sure you’ve got a business vehicle insurance policy.

On the bright side, even though you require a different type of insurance, the self-employed can write off some (or all) of their vehicle expenses when it comes time to file your taxes.

How to save now that you have all the facts

Person using laptop with screen that says Auto insurance / Shutterstock

With those myths debunked, you should be armed with all the facts you need to save on a new insurance policy. Nowadays you can even use tech to save on your policy.

Don’t forget to ask for a discount during the pandemic, as many providers have already given relief to policyholders and might do it again.

You could potentially score some credits and premium discounts to policyholders in the spring as well, depending on how much insurance you need.

But, again, the best way to save money on insurance is by shopping around for rates before you commit. If it’s been more than six months since you last looked around for a better deal on your policy, you could be leaving more than $1,000 a year on the table.

SmartFinancial will do all the price comparisons for you and simply present you with the highest-quality auto insurance at the best rate — and that’s definitely not a myth.

About the Author

Sigrid Forberg

Sigrid Forberg


Sigrid is a reporter with MoneyWise. Before joining the team, she worked for a B2B publication in the hardware and home improvement industry and ran an internal employee magazine for the federal government. As a graduate of the Carleton University Journalism program, she takes pride in telling informative, engaging and compelling stories.

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